Cost of PA increase

Summary

The requester asked for the detailed workings behind a Treasury estimate that increasing the personal allowance to £20,000 would reduce income tax revenue by £63m. The Treasury explained the modelling methodology and provided revenue impact ranges but withheld the specific individual tax records used in the calculation due to data protection laws.

Key Facts

• The Treasury uses a specific tool to model personal allowance changes against individual income tax records from the last complete tax year (2023/24).
• The detailed workings were withheld because they relate to individual client tax records, which are considered personal data under the GDPR.
• Modelling from October 2025 showed a £250 increase in personal allowance would reduce revenue by approximately £2.53 million.
• The Treasury Minister estimated that increasing the allowance to £20,000 would result in a revenue decrease between £52.5 million and £63 million.
• The revenue estimates do not include inflationary growth and are based on 60,282 assessments.

Data Disclosed

• £20,000
• £63m
• 2025-11-06
• 2025-12-03
• 2023/24
• £14,750
• £15,000
• 21%
• £291,178,435.15
• £288,668,924.08
• £2,534,016.14
• 60,282
• £2.5 million
• £3 million
• £52.5 million
• 2025-10-08
• 2025-11-04

Exemptions Cited

• Article 4(1) of the General Data Protection Regulation (GDPR) as applied by the Data Protection (Application of GDPR) Order 2018 (Personal Data)

Original Request

Recently Dr Allinson stated to the House of Keys that an increase of the personal allowance to £20,000 per annum would lead to a £63m reduction in income tax revenue. I would like to see the workings behind this figure.

Data Tables (1)

Full Response Text

Freedom of Information
Seyrsnys Fysseree

The Treasury Government Office,
Douglas Isle of Man, IM1 3PU

Telephone: (01624) 685605 Email: FOI.Treasury@gov.im

Government Website: www.gov.im

Our ref: 5067363 03 December 2025

Dear ###,

We write further to your request, received 6 November 2025, which states:

"Recently Dr Allinson stated to the House of Keys that an increase of the personal allowance to £20,000 per annum would lead to a £63m reduction in income tax revenue. I would like to see the workings behind this figure."

Our response to your request is as follows:

The Income Tax Division models such changes in personal allowances and thresholds against individual income tax records using a specific tool in the income tax system. The finer workings behind this figure therefore relate directly to individual client tax records and are consequently considered to be personal data under Article 4(1) of the General Data Protection Regulation as applied to the Island by the Data Protection (Application of GDPR) Order 2018 and cannot be released.

Although the finer workings cannot be released I can explain how the figures quoted by the Treasury Minister, Dr Allinson were arrived at.

The tool in the income tax system recalculates all income tax assessments for the last complete tax year, in this case 2023/24, against current rates and thresholds. This provides re-based figures to work from. All income tax assessments are then recalculated using the re-based figures and the proposed change, in this case an increase of £250 in the personal allowance.

When this modelling was produced on 8 October 2025 the income tax liability, based on 60,282 assessments from the 2023/24 income tax year with a personal allowance of £14,750 and a higher tax rate of 21%, decreased from £291,178,435.15 to £288,668,924.08 when calculated with a personal allowance of £15,000 and a higher tax rate of 21%, resulting in a decrease of £2,534,016.14 in revenue.

It should be noted that these figures will change depending on when the calculations are carried out as further assessments may be completed and others reviewed and revised.

Furthermore, these figures do not include any inflationary growth, hence why the Treasury Minister advised the House of Keys on 4 November 2025 that “the impact on Income Tax revenue is estimated to be in the region of £2.5 million to £3 million for every £250 the personal allowance is increased by”.

For the sake of clarity I should point out that the Treasury Minister also gave a range in respect of the estimated decrease in revenue if the personal allowance were to be increased to £20,000, stating that “increasing the personal allowance from the current £14,750 to £20,000 would result in a corresponding decrease of revenue of between £52.5 million and £63 million per year.”

These amounts were derived from the decrease in revenue if the personal allowance was increased by £250 and taken from the figures which were provided to the Treasury Minister in the House of Keys sitting on 4 November 2025 a copy of which is below.

Personal Allowance Revenue Increase of £250 Decrease of £2.5m - £3m Increase of £500 Decrease of £5m - £6m Increase of £750 Decrease of £7.5m - £9m Increase of £1,000 Decrease of £10m - £12m Increase to £20,000 Decrease of £52.5m - £63m

You may be interested in the Information Pack, last updated in July 2024, specifically the Taxpayer Base and Taxation of Individuals sections.

https://www.gov.im/media/1387425/income-tax-division-information-pack-july- 2024_compressed.pdf

Please quote the reference number 5067363 in any future communications.

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I will now close your request as of this date.